2.2.0.25falsefalse11501 - Disclosure - COMMITMENTS AND CONTINGENCIEStruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
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<tr valign="top"><td><b><font style="font-family: 'Times New Roman', Times;" class="_mt">15. </font></b> </td>
<td><b><font style="font-family: 'Times New Roman', Times;" class="_mt">COMMITMENTS AND CONTINGENCIES</font></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
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<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">a) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Concentrations of Credit Risk</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Credit risk arises out of the failure of a counterparty to perform according to the terms of the contract. The Company is exposed to credit risk in the event of non-performance by the counterparties to the Company's foreign exchange forward contracts and foreign currency swaps. However, because the counterparties to these agreements are high-quality international banks, the Company does not anticipate any non-performance. The difference between the contract amounts and the related market values is the Company's maximum credit exposure. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">As of December 31, 2010 and 2009, substantially all of the Company's cash and investments were held with one custodian. </div>
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<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">a) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Concentrations of Credit Risk — (continued)</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Of the $927,588 of reinsurance recoverables as of December 31, 2010, 48% was recoverable from four reinsurers, of which two reinsurers are rated A by A.M. Best Company and two reinsurers are rated A+ by Standard & Poors. As of December 31, 2009, 49% of reinsurance recoverable, excluding IBNR ceded, was recoverable from four reinsurers, of which one reinsurer is rated A+ by A.M. Best Company, two reinsurers are rated A and the other reinsurer is rated A-. The Company believes that these reinsurers are able to meet, and will meet, all of their obligations under their reinsurance agreements. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Insurance balances receivable primarily consist of net premiums due from insureds and reinsureds. The Company believes that the counterparties to these receivables are able to meet, and will meet, all of their obligations. Consequently, the Company has not included any allowance for doubtful accounts against the receivable balance. Of the $529,927 in insurance balances receivable as of December 31, 2010, $2,658 was past due over 90 days, which represented 0.5% of the total balance. </div>
<div style="margin-top: 12pt; font-size: 1pt;"> </div>
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<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">b) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Operating Leases</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company leases office space under operating leases expiring in various years through 2021. The Company also leases an aircraft through 2011. The following are future minimum rental payments as of December 31, 2010: </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
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<tr style="font-size: 1pt;" valign="bottom"><td width="90%"> </td>
<td width="2%"> </td>
<td width="1%" align="right"> </td>
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<div style="text-indent: -10pt; margin-left: 10pt;">2011 </div></td>
<td> </td>
<td valign="bottom" nowrap="nowrap" align="left">$ </td>
<td valign="bottom" nowrap="nowrap" align="right">13,341 </td>
<td valign="bottom" nowrap="nowrap" align="left"> </td></tr>
<tr valign="bottom"><td valign="bottom" nowrap="nowrap" align="left">
<div style="text-indent: -10pt; margin-left: 10pt;">2012 </div></td>
<td> </td>
<td valign="bottom" nowrap="nowrap" align="left"> </td>
<td valign="bottom" nowrap="nowrap" align="right">12,235 </td>
<td valign="bottom" nowrap="nowrap" align="left"> </td></tr>
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<div style="text-indent: -10pt; margin-left: 10pt;">2013 </div></td>
<td> </td>
<td valign="bottom" nowrap="nowrap" align="left"> </td>
<td valign="bottom" nowrap="nowrap" align="right">11,956 </td>
<td valign="bottom" nowrap="nowrap" align="left"> </td></tr>
<tr valign="bottom"><td valign="bottom" nowrap="nowrap" align="left">
<div style="text-indent: -10pt; margin-left: 10pt;">2014 </div></td>
<td> </td>
<td valign="bottom" nowrap="nowrap" align="left"> </td>
<td valign="bottom" nowrap="nowrap" align="right">11,165 </td>
<td valign="bottom" nowrap="nowrap" align="left"> </td></tr>
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<div style="text-indent: -10pt; margin-left: 10pt;">2015 </div></td>
<td> </td>
<td valign="bottom" nowrap="nowrap" align="left"> </td>
<td valign="bottom" nowrap="nowrap" align="right">9,710 </td>
<td valign="bottom" nowrap="nowrap" align="left"> </td></tr>
<tr valign="bottom"><td valign="bottom" align="left">
<div style="text-indent: -10pt; margin-left: 10pt;">2016 through 2021 </div></td>
<td> </td>
<td valign="bottom" nowrap="nowrap" align="left"> </td>
<td valign="bottom" nowrap="nowrap" align="right">47,627 </td>
<td valign="bottom" nowrap="nowrap" align="left"> </td></tr>
<tr style="font-size: 1pt;" valign="bottom"><td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;"> </td>
<td style="border-top: #000000 1px solid;"> </td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td valign="bottom" nowrap="nowrap" align="left"> </td>
<td> </td>
<td valign="bottom" nowrap="nowrap" align="left">$ </td>
<td valign="bottom" nowrap="nowrap" align="right">106,034 </td>
<td valign="bottom" nowrap="nowrap" align="left"> </td></tr>
<tr style="font-size: 1pt;" valign="bottom"><td> </td>
<td> </td>
<td style="border-top: #000000 3px double;"> </td>
<td style="border-top: #000000 3px double;"> </td>
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<div style="text-indent: 0%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left"> </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">Total rental expenses for the years ended December 31, 2010, 2009 and 2008 were $13,750, $12,211 and $10,992, respectively. During the year ended December 31, 2010, the Company terminated one of its office leases and recognized a termination fee of $1,128. </div>
<div style="margin-top: 12pt; font-size: 1pt;"> </div>
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<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">c) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Producers</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">For the year ended December 31, 2010, two producers individually accounted for 10% or more of total gross premiums written. These two producers accounted for 24% and 20% of gross premiums written, respectively. For the year ended December 31, 2009, two producers individually accounted for 10% or more of total gross premiums written. These two producers accounted for 26% and 21% of gross premiums written, respectively. For the year ended December 31, 2008, three producers individually accounted for 10% or more of total gross premiums written. These three producers accounted for 28%, 26% and 10% of gross premiums written, respectively. Each of these producers intermediate on business written in all three segments, namely U.S. insurance, international insurance and reinsurance. </div>
<div style="margin-top: 12pt; font-size: 1pt;"> </div>
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<tr valign="top"><td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">d) </font></i></b> </td>
<td><b><i><font style="font-family: 'Times New Roman', Times;" class="_mt">Legal Proceedings</font></i></b> </td></tr></table>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">On April 4, 2006, a complaint was filed in the U.S. District Court for the Northern District of Georgia (Atlanta Division) by a group of several corporations and certain of their related entities in an action entitled New Cingular Wireless Headquarters, LLC et al, as plaintiffs, against certain defendants, including Marsh & McLennan Companies, Inc., Marsh Inc. and Aon Corporation, in their capacities as insurance brokers, and 78 insurers, including Allied World Bermuda's insurance subsidiary in Bermuda, Allied World Assurance Company, Ltd. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The action generally relates to broker defendants' placement of insurance contracts for plaintiffs with the 78 insurer defendants. Plaintiffs maintain that the defendants used a variety of illegal schemes and practices designed to, among other things, allocate customers, rig bids for insurance products and raise the prices of insurance products paid by the plaintiffs. In addition, plaintiffs allege that the broker defendants steered policyholders' business to preferred insurer defendants. Plaintiffs claim that as a result of these practices, policyholders either paid more for insurance products or received less beneficial terms than the competitive market would have produced. The eight counts in the complaint allege, among other things, (i) unreasonable restraints of trade and conspiracy in violation of the Sherman Act, (ii) violations of the Racketeer Influenced and Corrupt Organizations Act, or RICO, (iii) that broker defendants breached their fiduciary duties to plaintiffs, (iv) that insurer defendants participated in and induced this alleged breach of fiduciary duty, (v) unjust enrichment, (vi) common law fraud by broker defendants and (vii) statutory and consumer fraud under the laws of certain U.S. states. Plaintiffs seek equitable and legal remedies, including injunctive relief, unquantified consequential and punitive damages, and treble damages under the Sherman Act and RICO. On October 16, 2006, the Judicial Panel on Multidistrict Litigation ordered that the litigation be transferred to the U.S. District Court for the District of New Jersey for inclusion in the coordinated or consolidated pretrial proceedings occurring in that court. The Court stayed proceedings in the litigation pending a decision by the Third Circuit Court of Appeals on an appeal of the court's decisions granting motions to dismiss in a related putative class action. Because of the stay, neither Allied World Assurance Company, Ltd nor any of the other defendants have responded to the complaint and written discovery that had begun has not been completed. On August 16, 2010, the Third Circuit issued its ruling in the related action, affirming the dismissal in large part, vacating it in part and remanding that case for further proceedings. On October 5, 2010, the court decided to extend the current stay until after it decides the renewed motions to dismiss the class action complaint that have been filed. At this point it is not possible to predict the outcome of the litigation; the Company does not, however, currently believe that the outcome will have a material adverse effect on the Company's operations or financial position. </div>
<div style="margin-top: 6pt; font-size: 1pt;"> </div>
<div style="text-indent: 4%; font-family: 'Times New Roman', Times; background: none transparent scroll repeat 0% 0%; color: #000000; margin-left: 0%; font-size: 10pt; margin-right: 0%;" align="left">The Company may become involved in various claims and legal proceedings that arise in the normal course of our business, which are not likely to have a material adverse effect on the Company's results of operations. </div> </div>15.
COMMITMENTS AND CONTINGENCIES
a)
Concentrations of Credit Risk
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